Dam projects up for independent review in Manitoba

It’s easy to be rattled by the latest details to come out about Ottawa’s agreement to agree sometime in

the future to a loan guarantee for Muskrat Falls.

It’s a term sheet we haven’t seen yet, apparently agreed to at the last minute when it looked like the whole thing was falling apart. (Rushed, last-minute decisions made under pressure from opposing interests — yes, aren’t they always the best kind? They’ve always served us so well as a province. And, yes, that’s sarcasm.)

But strangely, cooler heads can sometimes prevail before provinces rush headlong into major developments.

Much has been made about Manitoba Hydro International’s (MHI) supportive review using Nalcor’s own numbers for the Muskrat Falls project.

It’s interesting, then, that MHI’s parent, Manitoba Hydro, is now being told by the Manitoba government that its forecasting for major projects isn’t good enough, and that those projects will have to undergo a full and independent review by a panel of that province’s Public Utilities Board (PUB) — something that, in this province, the Dunderdale government is avoiding like the plague.

Two weeks ago, the Manitoba government announced that major dam projects in that province needed to be reviewed.

“Building Keeyask and Conawapa represents a major economic development opportunity for our province,” said Dave Chomiak, the minister responsible for Manitoba Hydro, in a news release.

“The purpose of the Needs

For And Alternatives To (NFAAT) review is to provide an independent assessment of the need for new generation and to compare the benefits of building new hydro generation to alternatives such as natural gas.”

The review will be done by a panel of that province’s PUB, and will examine everything from rate implications to declining export prices to the impact of shale gas development.

As the Winnipeg Free Press put it, “The shine of two new massive dams isn’t as shiny as it once was.”

Part of the problem, like always, is cost. The latest jump in the costs of the two projects that the government now plans to review saw

the Keeyask and Conawapa hydro dams jump from $4.59 billion and $6.33 billion, respectively, in 2009 to $5.64 billion and $7.77 billion now, a combined increase of 23 per cent.

But that’s only part of the cost increases: take the dams’ original price tags and Keeyask has a budget that’s risen by 47.5 per cent, and Conawapa by 56 per cent. And there aren’t even shovels in the ground yet. (This, after the utility’s last hydro dam, Wuskwatim, came in at something like 85.5 per cent over budget.)

There are other similarities as well: a bone of contention for the Manitoba regulator is that Manitoba Hydro wants to build a transmission corridor that will add three cents a kilowatt hour to the price of electricity (electricity that would go to both domestic and export customers) but wants the domestic customers in the province to pick up the full price for all customers.

Sounds a lot like Muskrat, where 40 per cent of the customers (ratepayers in this province) will pay 100 per cent of the tab for the project.

It’s not surprising that the review is something that Manitoba’s PUB has been looking for. Back in January, the board was blunt about the need for independent oversight.

“The board is unable to approve the higher rate increases requested by Manitoba Hydro because the utility’s business plan is incomplete, lacks required detail and has not been tested through what has been promised as a ‘Needs For And Alternatives To’ review by an independent tribunal that will have full access to the economic and financial assumptions which underpin Manitoba Hydro’s business plan,” the board wrote.

“Due to the hundreds of millions of dollars the province derives from Manitoba Hydro, the risks that will be borne by Manitoba Hydro’s domestic customers, and due to the economic and financial factors to be tested, such an NFAAT ought to be conducted by an independent tribunal with considerable expertise in the subject issues.”

Interestingly, the announcement of the review came the same day that Manitoba Hydro announced it had lost $13 million exporting electricity to the U.S. in the first six months of this year.

Muskrat Falls may be the best of all things. It may be the only option. But the last time our PUB looked at the project, there wasn’t enough information on the table to make that decision.

Here, the PUB won’t be asked to look again. In Manitoba, it’s a different story — maybe, with a different kind of ending for those who actually pay electric bills.

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Foghorn Leghorn

December 05, 2012 - 10:15

Why do I get that sinking uneasy feeling the more information that you see being released surrounding this project. 1) Manitoba Hydro the very company hired to review Muskrat Falls is having problems keeping it's own financial obligations in order. 2) SNC Lavalin the main engineering company involved in the project is embroiled in it's own international controversy over mishandling finances. 3) Now we learn that our own provincial government is looking at legislation to set rates for Muskrat Falls power, taking that responsibility away from the PUB. Then when you throw in the recent new privacy legislation passed by our government it the icing on the cake. I just feel I will be watching all of this unfold on a future episode of W5 or the Fifth Estate!

NL's PUB hired Manitoba Hydo as a tool to make an asssement that was concluded nill/void due to lack of nalcor's infomation and uncompleted studies. But dunderdale and kennedy have attached themselves to this report...Why?

its called the ndp at work russell. here in manitoba TODAY'S NDP which they like to call themselves gutted manitoba hydro to balance the books. we are already over a billion in debt and growing for the fical year, in return they allow the hydro company to raise its rates to consumers. TODAY's NDP have no clue how to control its spending, let alone run a province. anything the ndp say or do in newfoundland/labrador shouldn't be taken seriously, they are like their manitoba cousins. OUT TO LUNCH !

Now Russell don't go confusing the Muskrat Falls supporters with facts, they don't like that. Their little minds can only comprehend what the government tells them to think. Great article that needed to be shown, it is just more evidence of the fact that the government is trying to ram this through come hell or high water, and they have plenty to hide.

"The shine of two new massive new dams isn't as shiny as it once was". Indeed. Cost overruns of 47.5%, 56% and 85% - one does see a pattern here. It isn't suprising, however, given MHI's history. The choice of Manitoba Hydro as the independent expert selected to review the MF Project always troubled me. A simple Google search was sufficient to reveal their own troubled history with power projects. Failure to control project costs, inadequate market analysis and excessive capital costs led the Manitoba government to appoint a Commission of Inquiry (Tritschler) into Manitoba Hydro in 1977. In January ot this year, Manitoba Hydro was cited by the PUB because "the Utility's business plan is incomplete, lacks required detail and has not been tested through what has been promised as a Needs For And Alternative To (NFAAT) review by an independent tribunal that will have full access to the economic and financial assumptions that underpin MH's business plan". Hardly a glowing review of their abilities in the area(s) in which they were deemed - by Nalcor and our Government - to be "experts", when it comes to reviewing our own dam project. One can only imagine the "unforeseens" - the "unknown unknowns", as former US Secretary of Defense Donald Rumsfeld famously said of another "slamdunk" project - that will emerge as construction begins on a dam project in the Labrador wilds. "There are strange things done in the midnight sun, by the men who moil for gold....."